The Magic Theatre's emergency fundraising drive was a success, raising $455,000 - counting a $100,000 matching grant that put the company well over its $350,000 goal - "from about 1,100 donors in something like 23 states," Board of Trustees PresidentMissy Kirchner said in a Friday conference call with Artistic Director Loretta Greco. "We're still counting," she added. "Donations are still coming in."

That means not only that the next show, Oni Faida Lampley's "Tough Titty," will begin previews as scheduled Saturday, as previously reported, but also that the Magic will be able to complete its season. The season will be one show shorter than originally planned, however.

The decision was made at a board meeting Wednesday, the beginning, Kirchner says, of "a long-term project to reimagine a leaner Magic that is sustainable for the next 42 years." The season budget has been cut from $2 million to $1.65 million.

"So we're moving forward with a five-play season," Greco says, "and we're going to defer one play (the world premiere of "Mistakes Were Made" by "Six Feet Under" writer Craig Wright) to next year."

That leaves two more plays after "Tough Titty" - the world premiere of Lloyd Suh's "American Hwangap" and Theresa Rebeck's much-anticipated "Mauritius" - in the Magic's 42nd season, Greco's first as artistic director. The season got off to a critically well-received start in the fall with "The K of D" and Greco's staging of "Evie's Waltz," but box office revenues didn't meet expectations. The shortfall turned out to be the tip of fiscal problems that came close to closing a company whose modest size belies the considerable national reputation it's earned over four decades of developing new works by Sam Shepard, Edna O'Brien, Michael McClure, Rebecca Gilman and many others in its two theaters.

Current and former board and staff members disagree on some details about the size of the Magic's budgetary shortfall and how it was accrued, but there seems to be general consensus that its fiscal crisis in December was the result of a combination of causes.

The board had set what Kirchner now says was too high a budget for the 2008-09 season, partly based on incomplete knowledge of the extent of the company's debts and operating costs. The $600,000 accumulated debt that Greco cited when she announced the emergency fundraising campaign, Kirchner explains, was a combination of a long-standing $250,000 deficit and its financing, which included "a maxed-out line of credit," other debt and "the key part, accounts payable."

Added to that were new expenses, such as a pay raise for actors (from $350 to $490 a week), and the loss of a $132,000 Sloan Foundation grant when Greco decided not to continue the Magic's participation in its program for producing new plays about scientific subjects - a decision that's hard to dispute on artistic terms. But the biggest problems were in accounts payable, ranging from unpaid rent to credit card interest. This was the surprise that Greco had referred to as not being on the books. "I misspoke," she says. "It was a surprise, but it was on the books."

"The reports we were getting at the finance committee level and at the board level were not thorough enough for us to fully understand the mounting accounts payable," Kirchner says. "That's our fault. Maybe we should've stepped in sooner, but I will never make this mistake again. Going forward, as a board, we're going to exercise tighter oversight on the finances."

"We're seeing this happen all over the country," Greco says. "Any small new play organization that's left in the ecology of the American theater is operating on the edge. It has been a badge of honor that the Magic has always transcended. You take that, with the global economic crisis, which hit us in both earned income and contributed income in one quarter, and it's not a surprise that we were knocked off balance."